“I Believe in Opportunity Costs” | Sarah Cosgrove, Associate Professor of Economics and College of Arts and Sciences Assessment Coordinator, 2016
Economists define opportunity cost as the cost of something in terms of the next best alternative. Another way of stating the definition is the opportunity cost is what you must give up to get something else. I believe that every choice we make has an opportunity cost and that people make better choices when they explicitly consider the opportunity costs of their decisions.
When I finished my undergraduate degree, I chose to pursue a graduate degree rather than getting a job like most of my friends. As a graduate student, I lived on a tiny stipend, took out a small loan for living expenses not covered by my stipend, and I spent my days and nights learning, studying, thinking, writing, and running a lot to process all that was going on in my brain. At the same time, my friends were working and earning money, going to happy hours with co-workers, meeting spouses, getting married, and having babies. It would seem to an outsider that I was giving up a lot to pursue my goal of a Ph.D. in economics, but I made a conscious choice to temporarily give those things up because their value was lower than the value of what I was getting. That choice paid off, as I now have the career that I desired and the family that I hoped for. But I did have to choose. I could not have successfully completed my Ph.D. while also working a full time job and enjoying all of the social events that my friends enjoyed. By thinking about my options and weighing the relative costs and benefits, I felt good about my choice rather than dwelling on the things I was forgoing.
From whether to sleep in or get up and go to class, to what percentage of your income to save for retirement, every choice has an opportunity cost. If you stop and think about what you are giving up to get something else, you just might make a different decision. While lying there snuggled under your blankets hearing the cold wind whip through the trees, sleeping in might seem like an obvious choice. But if you think about what you will miss out on learning and the fact that you will have to learn the material on your own later, the value of staying in bed might not seem so great.
You are entering a time in your lives during which you will make many choices, large and small. Some decisions will affect your friendships, your current financial situation, your future financial situation, and your career. I encourage you to consider what you must give up to get something else. If you take on three part-time jobs to pay for school, will you have enough time to study and succeed in school? Next time you make a choice to do something, stop and think for a moment about what will you be giving up. Is it worth it?